In the world of investing, dividends serve as additional income for shareholders, offering a potential source of passive earnings and a key component of long-term wealth generation. As you delve into investing in the Philippine Stock Exchange (PSE), understanding the significance of dividends becomes crucial to unlocking the full potential of your stock market journey.
Stock Market 101: PSE Dividends
What are dividends?
At its core, a dividend represents a distribution of a company’s profits to its shareholders. When a company generates excess earnings, it has the option to allocate a portion of those profits as dividends to reward its shareholders.
Dividends can be paid in the form of cash, additional shares of stock, or other tangible benefits, depending on the company’s policy. Dividends also provide a tangible measure of a company’s financial health and can signal its stability and potential for long-term growth.
Types of Dividends
- Cash Dividends represent a distribution of the company’s earnings to shareholders in the form of monetary funds, which is the prevailing and widely adopted method of dividend allocation.
- Stock Dividends entail to shareholders are provided with additional company shares instead of receiving cash dividends. This alternative approach is typically communicated to stockholders as a percentage increase in their ownership of shares.
Terms of Dividend Payments
- Date of Record
Also known as the record date, it is the specific date set by a company to determine which shareholders are eligible to receive a dividend. Shareholders who are recorded as owners of the stock on the date of record will be entitled to the declared dividend. Anyone who purchases shares after the date of record will not receive the upcoming dividend payment.
- Payment Date
This refers to the date on which the dividend is actually paid to eligible shareholders. It is the day when the company distributes the dividend amount to the shareholders’ accounts or issues physical checks.
- Ex-Date or Ex-Dividend Date
The ex-date, often known as the “without dividend” date, is the specific day on which or after which shares of a stock can be traded without entitlement to the recently declared dividend. If investors buy shares on or after the ex-date, they will not receive the upcoming dividend payment. Usually, the ex-date is scheduled two business days ahead of the date of record to allow ample time for trade settlement.
- Declaration Date
The declaration date is when the company’s board of directors makes an official announcement regarding the dividend payment. It is the date when the company publicly discloses the dividend amount and provides essential information, including the date of record, ex-date, and payment date. It is an important event for shareholders as it provides them with information about the upcoming dividend distribution.
These dates and terms are important for investors to understand when considering dividend investments and planning their trading activities around dividend distributions. It is advisable to check the company’s announcements and consult financial sources for the specific dates and details related to dividend payments for individual stocks.
Example of Dividends
|Company||Type of Stock||Type of Dividend||Dividend Rate||Ex-Dividend Date||Record Date||Payment Date|
|Robinsons Retail Holdings, Inc.||COMMON||Cash||P2.00||May 17, 2022||May 20, 2022||Jun 10, 2022|
|JG Summit Holdings, Inc.||COMMON||Cash||P0.40||May 23, 2022||May 26, 2022||Jun 14, 2022|
|Filinvest Development Corporation||COMMON||Cash||Php0.07014||May 17, 2022||May 20, 2022||Jun 14, 2022|
Remember to conduct thorough research, seek professional advice if needed, and make informed investment decisions based on your financial goals and risk tolerance.